Indian rupee closes at record-low of 61.10 as RBI intervention flops

There was heavy dollar demand from importers,mainly oil refiners,and some banks on behalf of their clients as hopes of a strengthening dollar overseas weighed on sentiment,a forex dealer said. Better than expected US GDP growth has boosted the US dollar.

Also read: RBI monetary policy review: Rupee fear makes cbank leave interest rates unchanged

At the Interbank Foreign Exchange Market,the rupee resumed lower at 60.61 a dollar from the previous close of 60.43 and touched a high of 60.58.

Also read: RBI tightens hedging norms for FIIs

As local stocks declined,the rupee continued its downward march and touched a low of 61.17 before closing at an all-time low of 61.10,a fall of 67 paise or 1.11 per cent. The previous record low closing was 60.72 on June 26. However,the rupee touched all-time intra-day low of 61.21 on July 8.

“The moves by the government to curb rupee volatility and tame the exchange rate have partly worked,” said Ashtosh Raina,head of forex trading at HDFC Bank. “As long as there is no matching demand for the rupee,the dollar will always weigh heavy. That is what we have seen. The current account deficit (CAD) is still a major issue.”

In another attempt to support the rupee,the Reserve Bank yesterday made it mandatory for foreign institutional investors to obtain the consent of holders of participatory notes and derivative instruments before hedging. Earlier,the central bank tightened liquidity for banks and took steps to curb speculative activity in forex markets,among others.

The S&P BSE Sensex today fell for the eighth day,dropping 153 points,or 0.79 per cent,reversing early gains that came on the back of liberalised FDI norms. FIIs bought shares worth a net USD 46.28 million yesterday. The dollex index,consisting of six global rivals,was up 0.09 per cent.

“Today also,RBI intervention was suspected in the forex markets to support rupee,” said Pramit Brahmbhatt,CEO of Alpari Financial Services. “Trading range for spot USD/INR pair is expected to be within 60.80-61.50.”

“The rupee’s weakness was mainly attributed to the upbeat data from the US,which sent the US dollar index to its one-week high,” said Abhishek Goenka,Founder and CEO of India Forex Advisors. “Although the central bank took some measures to stem the fall in rupee,it could not provide a long lasting relief to the currency.”

RBI Governor D Subbarao today reiterated that liquidity tightening measures will be rolled back only after stability is restored in the forex market as volatility hurts growth.

“While steps initiated by the government,Sebi and RBI have been able to help rupee not breach 62-levels,one must bear in mind all these steps will need be given some more time to see their full effect,” said Dhanlaxmi Bank Executive Vice-President (Treasury) Srinivasa Raghavan.

Forward dollar premiums recovered on fresh payments by banks and corporates.

The benchmark six-month forward dollar premium payable in January rose to 259-264 paise from the previous close of 251-255 paise. Far-forward contracts maturing in July firmed up to 470-475 paise from 458-460 paise.

The RBI fixed the reference rate for the dollar at 60.8035 and for the euro at 80.3655.

The rupee remained weak against the pound sterling to end at 92.57 from the previous close of 92.07 and fell back to 80.70 against the euro from 79.99. It edged up against the Japanese yen to 61.22 per 100 yen from 61.25.

Indian rupee at record closing low; worst week in nearly 2 yrs

(Reuters) The Indian rupee fell to a record closing low on Friday,posting its worst week in 22 months,raising concerns the central bank is losing the battle to prop up the currency while the government has yet to take any meaningful measures to bring in inflows.

The rupee weakened ahead of key U.S. employment data,which will help shape expectations about when the Federal Reserve will start tapering down its monetary stimulus.

The currency fell 3.4 percent this week,and is below the levels at which it was trading on July 15 when the Reserve Bank of India unveiled its cash tightening steps to defend the currency.

Investors have started questioning the central bank’s resolve after Governor Duvvuri Subbarao said this week it would roll back measures to defend the rupee if the currency stabilises,while the government has yet to take steps such as a sale of overseas bonds to ensure real money flows.

The RBI has,instead,been relying on interventions to support the rupee. Traders said the central bank likely intervened again on Friday as the rupee came within a whisker of its record low of 61.21 seen on July 8.

“The RBI is sprinkling water. It should intervene in a massive way for a day or two to support the currency and bring it back to a comfortable level to hit speculators hard,” said K.N. Dey,a senior forex consultant.

The partially convertible rupee closed at 61.10/11 per dollar compared with 60.43/44 on Thursday.

Investors will focus on dollar movements after the U.S. jobs report. The monsoon session of parliament is due to start on Monday,with important legislation such as a food security bill pending.

In the offshore non-deliverable forwards,the one-month contract was at 61.66,while the three-month was at 62.56.

In the currency futures market,the most-traded near-month dollar/rupee contracts on the National Stock Exchange,the MCX-SX and the United Stock Exchange all closed around 61.45 with a total traded volume of $2.6 billion.